In a big win for Cyrus Mistry, the NCLAT on Wednesday restored him as executive chairman of Tata Sons and ruled that appointment of N. Chandrasekaran as the head of the holding company of salt-to-software conglomerate was illegal.
The NCLAT, however, stayed the operation of the order with respect to reinstatement for four weeks to allow Tatas to appeal.
Setting aside a lower court order, the National Company Law Appellate Tribunal (NCLAT) also quashed the conversion of Tata Sons into a private company from a public firm.
Mistry, a scion of wealthy Shapoorji Pallonji family, was in a coup removed as chairman of Tata Sons in October 2016. He was the sixth chairman of Tata Sons and had taken over in 2012 after Ratan Tata. He was later also removed as director on board of Tata Sons.
However, Mistry and Tata family patriarch Ratan Tata reportedly had a falling out over key investment decisions, including manufacturing of world's cheapest car Nano.
Mistry, whose family owns 18.4 per cent stake in Tata Sons, challenged his removal in the National Company Law Tribunal (NCLT).
The case of oppression and mismanagement against Tata Sons and 20 others, including Ratan Tata, filed by Mistry family entities — Cyrus Investments and Sterling Investments — were, however, in March 2017 dismissed by the NCLT ruling that they were not eligible to pursue the allegations.
Section 244 of the Companies Act, 2013, allows a shareholder of a company to bring an oppression and mismanagement case against the firm if it holds not less than one-tenth of the issued share capital.
On appeal, the Cyrus Mistry firms had secured a partial win at the NCLAT, which waived the 10 per cent shareholding requirement but remitted the matter to the NCLT.
In July last year, the NCLT rejected Mistry's petition to reinstate him and found no merit in his allegations of operational mismanagement and oppression of minority shareholders.
Mistry had approached the appellate tribunal against the verdict of Mumbai NCLT. The NCLAT had reserved its judgment after completion of arguments from both sides in July this year. The judgment was pronounced by a two-judge bench headed by Justice S J Mukhopadhyay on Wednesday.
On the verdict, shares of various Tata Group companies plunged by up to 4 per cent.
Tata Global Beverages tanked 4.14 per cent, Tata Coffee plunged 3.88 per cent and Tata Motors dropped 3.05 per cent on the BSE. Tata Motors was the top loser among the BSE Sensex constituents.
Also, Indian Hotels Company dipped 2.48 per cent, Tata Chemicals fell 1.65 per cent, Tata Investment Corporation 1.22 per cent and Tata Power Company 0.98 per cent.
In contrast, Tata Consultancy Services stock rose marginally by 0.07 per cent, Tata Metaliks gained 2.07 per cent, Tata Communications 1.68 per cent, Tata Elxsi 1.53 per cent, Tata Steel 1.16 per cent and Titan Company 0.09 per cent.